Hedge funds are irresistible to some investors. What if you just can't fight the temptation to join the crowd? Ask the vendor these questions.

WHERE'S YOUR OWN MONEY?

Your best insurance against a lousy fund is to make sure the managing partners have a lot of their money, and much of their net worth, in the fund. If not, walk away.

WHAT'S UNDER THE SKIRT?

It might undermine some of the hedge fund's mystique, but the manager should reveal how he proposes to make money, what risks he's taking and enough about what he already owns for you to judge whether his purported strategy complements your existing portfolio.

WHO'S COUNTING THE MONEY?

Hedge fund managers can pad their pay by pumping up reported returns. Make sure the fund is regularly audited--35% aren't--and that valuations of holdings are generated by a reputable outsider like GlobeOp Financial Services or Citco Group. Ask to receive a monthly list of holdings and valuations directly from the fund's prime broker (SEC-registered Dalton Global Opportunity Fund discloses its positions daily).

IS THERE ADULT SUPERVISION?

With all the money to be made running hedge funds, former investment bankers, brokers and analysts are flooding into the business. But so are a lot of crooks and incompetents. Ask who's in charge of what. If the answers don't add up, move on.

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